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Bank & Finance - November 13, 2023

Loan repayment pressure increasing

$87 m paid in 3-month

Mahfuja Mukul: Bangladesh under the pressure of foreign debt repayment. In the first three months of the current financial year, $870 million have been disbursed, which in local currency (at Tk 110 per dollar) is about Tk 9,570 million.
But during the same period of the last financial year, $525.6 million or about Tk 5,781.6 million were paid. According to this, the payment in the financial year 2023-24 has increased by $34.44million or about Tk 3,788.40 crore.
Even the amount of debt repayment increases in the next month as compared to the previous month. This information was obtained by reviewing the report published by the Economic Relations Department (ERD).
ERD secretary Sharifa Khan told Daily Industry when asked about this, you only see the negative side. Don’t see anything positive. Now it is normal to increase our loan repayment amount.
We have prepared for this. Big loan installments have to be paid in the coming days, so the cost of this part will increase. It is a normal process. Earlier there were small loans. Now our debt size has increased. Big projects are being implemented. So, more money is needed. So, when the time comes to pay, it must be paid. In response to a question, she said, Bangladesh has never faced any problem in paying installments so far. Hopefully, it will not happen in the coming days.
According to sources, between July-September, various development partner countries and organizations paid $870 million in total interest and principal. Of this, $37.84 million have been paid as interest and $49.2 million in principal.
In these three months of the last financial year, the interest was $13.7 million and the principal amount was $388.5 million. On review, it can be seen that the comparative interest payments are increasing rapidly.
Executive Director of the Institute for Inclusive Finance and Development (INM) Mostafa K Mujerisaid Daily Industry that most loans for large projects have short grace periods and short repayment periods. It’s time to pay them back. The amount of debt repayment will increase at an increasing rate in the coming days. With this, the rebate against various projects has decreased. Besides, there is a shortage of reserves.
Besides, due to the global and domestic political situation, there is doubt whether it will be possible to increase the speed of the project or increase the export. All in all, foreign money management can come under great pressure. For this reason, increasing remittances in the short term should be given utmost importance. Reasons why hundi is more attractive, remittances should be increased through legal channels. In short, there is no option to increase remittances in the short term to deal with the current situation.
Meanwhile, the amount of foreign money received is decreasing due to various reasons including the slow pace of development projects. In the last three months of the current financial year, development partners have released $128.17 million. Out of this, loans are $123.12 million and grants are $5.5 million.
In the same period of the last financial year, the discount was $134.92million. Out of this, $1.29 billion loans and $5.12 billion have been exempted as grants. Comparable deductions decreased by $6.75 million.
Sources in the Ministry of Finance and Economic Relations Department (ERD) said that despite the existence of economic crisis, the push to repay foreign loans has already started this year.
It will peak in 2027 and continue for the next few years. In particular, China, India and Asian Infrastructure Investment Bank (AIIB) loans will begin to be repaid with interest. Apart from this, the principal loan installments of Rooppur nuclear power project will start in 2027 after the end of the grace period.
The debt repayment program of the Metrorail project will begin in 2028. In this context, the debt repayment pressure will gradually increase. A total of $278 million has to be paid in the current financial year. Debt repayment will cost a maximum of $515 million in the fiscal year 2029-30. After that the repayment will continue to decrease.
It is said that if the existing continuity is maintained, the accumulated debt of Bangladesh will continue to increase in the next three years.

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